German economy could continue to shrink: Bundesbank

FRANKFURT, Aug 19 (Reuters) - The German economy could have
continued to shrink over the summer as industrial production
drops amid a dearth of orders, the Bundesbank said on Monday,
suggesting that the euro zone's biggest economy is now in a
recession.

German growth contracted in the second quarter on slumping
exports as a global trade war, China's own slowdown and Brexit
uncertainty sapped confidence, dealing a blow to an
export-focused economy.

"Overall economic performance could again decline slightly,"
the Bundesbank said in a monthly report.

"The main reason for this is the continuing downturn in
industry," the central bank said, pointing to a significant
decline in orders and a big drop in sentiment indicators for
manufacturing firms.

While domestic consumption continues to isolate the economy,
the jobs market is already showing signs of weakness and
confidence in the services sector is also dropping, the
Bundesbank added.

Still, the construction boom is likely to continue,
providing some support.

While Germany has so far rejected the idea of boosting
public spending to offset the slowdown, Finance Minister Olaf
Scholz said that Berlin has the fiscal strength to counter any
future economic crisis "with full force".

Speaking on Sunday, Scholz said the global financial crisis
in 2008/2009 had cost Germany roughly 50 billion euros and the
government could again muster such a sum, if necessary.

Obsessed with running a balanced budget, Germany has
produced surpluses for years, ignoring calls for more spending
to boost growth.
(Reporting by Balazs Koranyi
Editing by Francesco Canepa)

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